This bill establishes a private health insurance purchasing arrangement (PHIPA) to provide health insurance coverage for state residents, and creates a private, nonstock corporation, called the Private Health Insurance Purchasing Corporation of Wisconsin (corporation), to facilitate and administer PHIPA. The eight members of the corporation's board of directors are designated by the governor and various business organizations and labor unions. The corporation's meetings must be open to the public, and it must keep its records open to inspection by the governor, the secretary of administration, any committee of the legislature, the Legislative Fiscal Bureau, and the Legislative Audit Bureau, which must conduct both a financial audit of the corporation and a performance evaluation audit of PHIPA at least once every two years. The corporation must keep its hiring practices and its procedures for soliciting bids or proposals in writing and open to public inspection, as well as all of its requests for bids or proposals and its analyses of, and final decisions on, bids and proposals received. The corporation must annually report to the governor and the legislature on its activities.

Eligibility; establishing accounts

Every eligible resident is eligible for PHIPA. An eligible resident is defined in the bill as an individual who is under 65 years of age; who has been domiciled in the state for at least six months or, if under six months old, whose parent or guardian has been domiciled in the state for at least six months; who maintains a substantial presence in the state; and who is not an inmate of a penal facility, not a resident of an institution for the mentally ill or developmentally disabled, not eligible for health care coverage from the federal government, and not eligible for Medical Assistance or Badger Care unless a waiver from the federal secretary of health and human services is granted that allows individuals who are eligible for Medical Assistance or Badger Care to be covered under PHIPA.

Beginning in 2008, the corporation must establish for every eligible resident, except for one who objects for religious reasons, a private health insurance purchasing account (account). The account of every eligible resident who is at least 18 years of age will include a health savings account (HSA).

Insurers; health care plans

The corporation must solicit bids from, and contract with, insurers to offer health care plans under PHIPA. There must be at least two health care plans offered by at least two insurers in each county of the state. The corporation must rank, on a countywide basis, each of the health care plans offered, assign each plan to one of three tiers, and determine the premium for each. Plans that the corporation determines provide high quality care at a low risk-adjusted cost will be assigned to Tier 1; plans that the corporation determines provide care at a higher risk-adjusted cost will be assigned to Tier 2; and plans that the corporation determines provide care at the highest risk-adjusted cost will be assigned to Tier 3. Every year there will be an open enrollment period during which each eligible resident may select a health care plan from among those offered. An eligible resident who does not select a plan will be randomly assigned to a Tier 1 plan.

Funding and uses of accounts

Although the bill does not provide a funding source or mechanism, the accounts and HSAs are to be funded beginning in 2009, which is also when coverage under PHIPA begins. The amount that is to be credited to each eligible resident's account is the full premium amount for coverage under a Tier 1 plan in the county in which the eligible resident resides, actuarially adjusted for the eligible resident's age, sex, and other appropriate risk factors. The corporation pays this amount to the health care plan selected by the eligible resident. Only if an eligible resident has selected a Tier 2 or Tier 3 plan must he or she pay any additional, out-of-pocket amount for the premium. The bill provides that the amount credited to an eligible resident's HSA will be $500 in 2009, and adjusted to reflect changes in the U.S. consumer price index for years after that. The amount credited to an HSA, however, may be increased or decreased for various reasons, such as whether the eligible resident follows a healthy lifestyle protocol and whether the corporation estimates that revenues will exceed expenses or expenses will exceed revenues in a given year. Federal law requires that amounts credited to an HSA must be used to pay for medical care.

Benefits; cost-sharing; preexisting condition exclusion

Every health care plan offered will provide the same benefits and, except for premiums, will require the same cost-sharing. Benefits under PHIPA include medical and hospital care coverage and related health care services, prescription drug coverage, and limited dental care. Cost-sharing, including deductibles, coinsurance, and copayments, will not apply to certain types of care, including emergency care, prenatal care, medically indicated immunizations for children, and other specified types of preventive care. However, benefits may be reduced, under a procedure outlined in the bill, if the corporation determines that expenses will exceed revenues for a given year or years.

Except for those services to which cost-sharing does not apply, each eligible resident who is at least 18 years old on January 1 must pay a deductible of $1,200 in that year, and each eligible resident who is less than 18 years old on January 1 must pay a deductible of $100 in that year. After the deductible has been satisfied, an eligible resident must pay coinsurance of between 10 and 20 percent, as determined by the corporation, for prescription drugs and covered services, except for those services to which cost-sharing does not apply. Prescription drugs are subject to additional coinsurance or copayments, as determined by the corporation. The additional coinsurance or copayments must be higher for prescription drugs that are not on a preferred list determined by the corporation.

Notwithstanding the required deductible, coinsurance, and copayment amounts, an eligible resident who is at least 18 years old on January 1 may not be required to pay more than $2,000 per year in total cost-sharing; an eligible resident who is less than 18 years old on January 1 may not be required to pay more than $500 per year in total cost-sharing; and a family of two or more eligible residents may not be required to pay more than $3,000 per year in total cost-sharing. In addition, the corporation must reduce one or more of the cost-sharing amounts for low-income eligible residents, and the deductible and maximum cost-sharing amounts are to be adjusted annually to reflect changes in the U.S. consumer price index.

There is a coverage exclusion for any preexisting condition of an eligible resident who, at any time during the 18 months before becoming an eligible resident, resided outside of Wisconsin and did not have health insurance coverage substantially similar to the coverage under PHIPA. However, the preexisting condition exclusion may not extend beyond the date on which the eligible resident has been continuously covered under PHIPA for a total of 18 months.

Health care advisory committee

The corporation is required to establish a health care advisory committee to advise it on specified health-related issues. The corporation must consult with the health care advisory committee and other experts on various health-related issues, such as creating incentives for eligible residents to adopt healthier lifestyles and increasing transparency of health care cost and quality information, and must adopt policies that further these goals.

Waiver of federal requirements; proposed legislation

Under the bill, the corporation and the Department of Health and Family Services (DHFS) must develop a plan for providing coverage under PHIPA for individuals who would be eligible residents except that they are eligible for Badger Care or for Medical Assistance under what DHFS determines is the low-income families category. DHFS must submit the plan to the legislature, along with its recommendations on the desirability of requesting waivers that would allow implementation of the plan and the use of federal financial participation to fund health care coverage for those individuals under PHIPA. If DHFS requests waivers upon the authorization of the legislature, and if the waivers are granted, DHFS must submit proposed legislation implementing the provisions approved under the waivers. In addition, to facilitate the provision of coverage under PHIPA for individuals who are eligible for Badger Care or for Medical Assistance under what DHFS determines is the low-income families category, DHFS and the Legislative Fiscal Bureau must submit proposed legislation that separates the Medical Assistance provisions of the statutes, including related appropriations, into two eligibility categories, one for low-income families and one for elderly and disabled persons.

Adoption of federal law for health savings accounts

The bill adopts, for state income and franchise tax purposes, section 1201 of Public Law 108-173 as it relates to claiming a deduction for an amount that a person pays into a health savings account.

This bill will be referred to the Joint Survey Committee on Tax Exemptions for a detailed analysis, which will be printed as an appendix to this bill.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB1140, s. 11Section
1. 13.94 (1s) (c) 5. of the statutes is created to read:

AB1140,4,32
13.94 (1s) (c) 5. The Private Health Insurance Purchasing Corporation of 3Wisconsin for the cost of the audits under s. 260.05 (4).

AB1140, s. 21Section
2. 20.855 (8m) of the statutes is created to read:

AB1140,5,122
20.855 (8m)Private Health Insurance Purchasing Corporation of 3Wisconsin. (r) Health insurance purchasing accounts and administration. After 4deducting the amounts appropriated for the state's share of benefits and 5administrative costs under the Medical Assistance program that are attributable to 6the low-income families category, as determined under 2005 Wisconsin Act .... (this 7act), section 14 (1) (b
) and the amounts appropriated for the state's share of benefits 8and administrative costs under the Badger Care health care program under s. 949.665, the balance of the moneys in the health insurance purchasing trust fund to 10be paid to the Private Health Insurance Purchasing Corporation of Wisconsin for 11establishing, funding, managing, and assisting individuals with the use of, the 12health insurance purchasing accounts established under ch. 260.

AB1140, s. 313Section
3. 25.17 (1) (gd) of the statutes is created to read:

AB1140,5,191625.775Health insurance purchasing trust fund. There is established a 17separate, nonlapsible trust fund designated as the health insurance purchasing 18trust fund, consisting of all moneys appropriated or transferred to or deposited in the 19fund.

AB1140, s. 520Section
5. 40.51 (1) of the statutes is amended to read:

AB1140,5,2521
40.51 (1) The procedures and provisions pertaining to enrollment, premium 22transmitted and coverage of eligible employees for health care benefits shall be 23established by contract or rule except as otherwise specifically provided by this 24chapter. Health care benefits provided under this subchapter shall be in addition to 25health care benefits provided eligible employees under ch. 260.

AB1140, s. 61Section
6. 71.83 (1) (ce) of the statutes is created to read:

AB1140,6,62
71.83 (1) (ce) Health savings accounts. Any person who is liable for a penalty 3for federal income tax purposes under section 223 (f) (4) of the Internal Revenue Code 4is liable for a penalty equal to 33 percent of that penalty. The department of revenue 5shall assess, levy, and collect the penalty under this paragraph as it assesses, levies, 6and collects taxes under this chapter.